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Wal-Mart Lowers Spending Forecast

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By ANNE D'INNOCENZIO

The Associated Press

Published: June 18, 2008

BENTONVILLE, Ark. - Wal-Mart Stores is reducing its capital spending forecast for fiscal 2009 as it slows construction of supercenters amid a weakening U.S economic environment.

The world's largest retailer said Tuesday that it expects to spend $13 billion to $14 billion during the fiscal year ending Jan. 31, 2009. In October, the company said it expected to spend $13.5 billion to $15.2 billion.
Chief Financial Officer Tom Schoewe says the lower forecast "reflects Wal-Mart's ability to grow more efficiently with reduced capital expenditures." He says the Bentonville, Ark.-based company plans moderating supercenter growth in the United States.

The news wasn't surprising to analysts because Schoewe told shareholders at its annual meeting in Fayetteville, Ark., this month that capital spending would likely be at the low end of the projection. Trimming capital expenditures boosts both the company's cash flow and returns to shareholders. While capital reductions have occurred across the company, the most significant have been with its Wal-Mart U.S. operations, according to the company.

Wal-Mart first announced a reduction in capital expenditures at its shareholders meeting in June 2007.

"It's a recognition that the U.S. is overstored," said Patricia Edwards of investment manager Wentworth Hauser and Violich, noting that Wal-Mart is putting more emphasis on its international expansion. The company's international sales increased almost 18 percent to $90.6 billion last year. But she added that Wal-Mart is "walking a tight rope" between spending too little on stores or too much. She is monitoring to see the company still maintains its stores.

Edwards added that Wal-Mart has been a leader in trimming capital expenditures but others are following suit.

Gap's chief executive Glenn Murphy told investors at a PiperJaffray consumer conference June 10 it aims to use its existing real estate to create smaller-scale stores and does not plan to open new stores in the near term.

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